Your description matches an event overheard on RT whilst taking off from a midlands GA field on Sunday. If we're talking about the same one, it was AFIS not A/G, doesn't excuse what happened tho.
The student pilot did sound in a real panic. In defence of the instructor (who had just taken off into the busy circuit), the FISO hadn't asked the student for his altitude so the instructor, worried about the student blundering into the circuit at circuit height, intervened to try to determine his altitude, he also suggested that the FISO ask the student to call 121.5, which the student duly did. My impression was that the instructor's intervention was prompted by the lack of effective action from the FISO.
I have to say the FISO was petty poor. As I returned to the same field 1.5 hrs later the circuit was still busy and I had to go-around as someone popped out of nowhere and called final for the same runway just after me. He was asked by the same FISO what his position was in relation to me and called "in front of and below" (I had no other aircraft in front or below and had not seen any other traffic as I descended along the base leg). As I was now in doubt about the other aircraft's position I chose to go around. Didn't catch the other aircraft reg so couldn't speak to him later about what happened.
It was amazing how much better our traffic awareness was once the FISO left the tower and the airfield returned to A/G.